EU car sales reform could mean higher prices here

New EU rules aimed at increasing competition in car sales could paradoxically mean higher prices in Ireland, industry sources have warned.

The reforms, announced yesterday by the European Commission, will allow dealers to sell more than one brand - opening the way, at least in theory, to "car supermarkets".

The new rules also extend to car maintenance, forcing manufacturers to provide parts and equipment to independent repair shops.

Allowing for a 12-month transition period, most of the changes take full effect from October 2003. In the face of intense lobbying from manufacturers, however, the Commission has deferred until 2005 one of the key measures - allowing car dealers to open outlets anywhere in the EU.

Mr Mario Monti, the Competition Commissioner, called the new rules a "bold and balanced reform aimed at injecting competition at all levels of car distribution and repair".

But consumer and industry representatives differed sharply on what the changes would mean for Ireland. The Consumers' Association predicted the increased choice would inevitably benefit the customer, while the Society of the Irish Motor Industry (SIMI) suggested the pre-tax prices of Irish cars would most likely rise.

SIMI's chief executive, Mr Cyril McHugh, said manufacturers were effectively "subventing" car prices in high-tax countries such as Ireland and Denmark, with the result that wholesale vehicles were up to "30 per cent" cheaper here than in Britain.

"One of Commissioner Monti's stated objectives is to reduce pre-tax price variations in Europe," he added, warning that harmonisation would probably mean higher prices in Ireland.

At present, for example, the pre-tax price of a Nissan Almera can range from €8,947 in Denmark, to €11,461 in Ireland, to €14,015 in the UK.

Although current rules prevent Irish dealers engaging in anything but "passive" selling across national boundaries - in which the first approach is made by the customer - some 30,000 new cars are sold to the UK each year.

With dealers allowed a more active approach under the new rules, and the ability to open outlets across borders from 2005, manufacturers will be forced to harmonise wholesale prices.

Mr McHugh predicted Irish and British prices would meet somewhere in the middle. However, the Consumers' Association said Ireland's wholesale prices for cars were much higher than in Greece, for example, and suggested there was plenty of scope for reductions.

The association welcomed more competition in car repair, predicting consumers would benefit.